Market power is the ability of a business to insulate itself from competition. For example a business with substantial market power may be able to raise prices above competitive levels, or lower the quality of its products without having to worry about losing customers.

A range of factors are relevant to whether a business has substantial market power. These include market share, the height of barriers to entry, and the degree of constraint imposed by existing competitors. The ACCC does not have a set market threshold to determine whether a business has substantial market power. A business with a large market share will often have substantial market power, but this won't always be the case.

For example, a business with a large market share won't have substantial market power if it is easy to set up a competing business in that market.

More than one business can have substantial market power in the same market.

In general, conduct substantially lessens competition when it interferes with the competitive process in a meaningful way by deterring, hindering or preventing competition.

The relevant ‘market’ includes goods and services that are suitable for, or in close competition with the goods or services under analysis.

This takes into account:

  • the goods or services supplied by a business and its close substitutes;
  • the geographic area where the goods or services are supplied or acquired and nearby substitutes; and
  • the different levels in the supply chain e.g. the production, wholesale or retail level covered by a market

in which the competitive process takes place.